Shortfalls in Pension Funds

Hi All

Thanks beforehand for your answers.

We are a small company and some of the employees have left. According to our pension fund, due to the last year's bad investment performance, our coverage ratio is low and there is not enough money to pay back the funds of the employees who left.

They request us to fund the shortfall now, this is the question.. The company or its employees are being asked to fund the shortfall. Can they do this? Isn't there an alternative somehow for funding this shortfall? Perhaps an insurance that should pay this / government that should guarantee / the pension fund itself should cover it? Is there such alternative or do we have to cover the shortfall?

Many thanks for your time and the answers.

Best

Dear Founder

This sounds like a legal matter. I strongly recommend to ask a legal professional in this matter. 

You can also ask this question to some consumer media like Beobachter and K-Tipp/K-Geld. They have legal professionals as well and it's free (you only have to have a subscription which doesn't cost much).

Best

The law governing the rehabilitation of pension funds that do not have enough assets to cover their members' benefits lists these measures that the pension fund may be required to take to close the gap:
1. Temporarily reducing benefits (minimal or no interest paid on voluntary benefits, for example)
2. Restricting early withdrawals for buying property
3. Request contributions from participating employers
4. Requesting injections of funds from the LOB Guarantee Fund
5. Release of reserves from participating employers (money paid in advance to cover future contributions)
6. Request extra rehabilitation contributions from participating employers
7. Request extra rehabilitation contributions from participating employees
8. Request extra rehabilitation contributions from pensioners
9. Reducing the interest rate for compulsory benefits

So the answer to your question is yes, the faltering pension fund can demand financing from its participants (employers, employees, and pensioners).